How to follow the money in rare-coin collecting

Beware the pitfalls and pitches investors and hobbyists face

DavidB. Wilkerson

CHICAGO (MarketWatch) — Coin dealer James DiGeorgia saw it for just a moment — a rare Roman gold coin he found extremely desirable — but he hesitated before deciding to buy it.

“I heard the dealer say to another customer, ‘Sold,’ ” DiGeorgia recalled. “I snoozed for three minutes, and it cost me a wonderful coin.”

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That’s the appeal and the frustration of collecting rare coins, which isn’t just for hobbyists anymore. About 7 million to 10 million people in the U.S. are serious coin collectors, experts estimate, and many regard their collections as investments in the same vein as antiques, fine art and wine.

Experts say classic U.S. gold coins and high-quality coins in silver and copper, authenticated and judged for quality by one of the leading services, are among the best buys nowadays in the field of numismatic coin collecting.

They caution, however, that buyers must be sharp enough to navigate a hobby fraught with pitfalls — including counterfeits, doctoring of coins, false claims of rarity, overpricing and theft.

One prerequisite: You should be truly fascinated by coins. The way they look, their history, the very way they shimmer in the light — because to be a successful collector-slash-investor, you have to spend many hours looking at coins and studying them, to be able to accurately assess their authenticity and value.

“The single best investment you can make in your collection is time,” said veteran collector Mike Nottelmann, co-host of the Internet radio series “The Coin Show.”

Coins of the realm

Casual collectors who know the basics of the hobby and want to build a serious collection should focus on a series of coins they find interesting, said Matt Dinger, proprietor of Lost Dutchman Rare Coins in Indianapolis, Ind., and Nottelmann’s co-host.

One of the keys to getting a solid return on your coin investment is to choose U.S. coins that are perennially popular with collectors, such as the Morgan Dollar; the Lincoln Cent (minted since 1909); the Indian Head Cent (1859-1909); the Buffalo Nickel (minted from 1913-38); the Mercury Dime (1916-45); the Washington Quarter (given a big lift in recent years by the 50 States series); the Walking Liberty Half-Dollar (1916-47); the Barber, or Liberty Head, Half Dollar (1892-1916); the Indian Head $10 Eagle (1907-33) and the St. Gaudens $20 Double Eagle (1907-33).

“Coins that are hot tend to stay hot for a long time,” Dinger said. “There’s always a collector base for them, so there’s always a demand for them.”

That constant popularity also means bargains will rarely be found among these issues, Nottelmann pointed out. “So the margins won’t be as big, but they’ll be more consistent.”

Nottelmann identified three books he believes every collector should own:

• “A Guide Book of United States Coins” (66th edition, 2013), by R.S. Yeoman and edited by Kenneth Bressett, Whitman Publishing.

The guide includes a concise history of U.S. coinage, a glossary of numismatic terms and illustrated listings for all U.S. coin series issued since 1793, including denominations; descriptions of design, composition, diameter and weight; each year the coin was minted and how many pieces were struck in a given year by each of the mints that produced them; and approximate prices paid for the coin in various states of condition.

• “PCGS Guide to Coin Grading and Counterfeit Detection” (2nd edition, 2004), by John Danreuther and edited by Scott Travers, House of Collectibles Publishing.

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